Health Care Reform

During the health care debate, the Mayo Clinic, the Cleveland Clinic, Geisinger Health System and Intermountain Healthcare were repeatedly touted as models for a new health care delivery system.

Now, they have something else in common: All four have declined to apply for the “Pioneer” program tailor-made by the Obama administration to reward such organizations.

“When the poster boys ask that the posters be taken down, you have a problem,” says Michael Millenson, president of Health Quality Advisors LLC…

The four health systems are considered the most promising models for “accountable care organizations,” a new approach to delivering health care services that rewards doctors and hospitals for providing high-quality care to Medicare beneficiaries while keeping costs down. The ACO provision became one of the most highly anticipated elements of the health care overhaul, and providers embarked on a frenzied race to join in as quickly as possible.

But when the proposed regulation for the program was announced in March, excitement fizzled.

Hospital and doctor groups complained that the program created more financial risks than rewards and imposed onerous reporting requirements. The American Medical Group Association, which represents nearly 400 large provider organizations, responded with a letter to CMS warning that more than 90 percent of its members would not participate because of the reporting requirements and financial disincentives. In particular, the proposed rule would impose penalties for ACOs that do not achieve savings.

In response, HHS announced the Pioneer program in May, promising it would “provide a faster path for mature ACOs” like the Mayo Clinic that would allow the high-performing health systems to pocket more of the expected savings in exchange for taking on greater financial risk. HHS estimated that the Pioneer program could save Medicare as much as $430 million over three years.

The big boys in health care were so impressed by the latest-and-greatest rendition of Obamacare’s hot new ACO “reform” (which is little different than the disastrous capitated HMO model which went down in flames not so very long ago) that they responded, “Thanks, but no thanks.”

No doubt a new rendition of ACOs will be forthcoming soon, complete with a host of new regulations, onerous reporting requirements, and penalties for care which does not meet “quality” (AKA, low-cost) standards set by the government. After all, who knows more about “quality” than our sharp-witted wizards in Washington? Be afraid — be very afraid…

Centralized funding and control of health care is beyond disastrous. It is paving the road to national bankruptcy. The answer to this monstrous failure is, as always, more control, more regulations, more centralization. Sadly, like a runaway train, it hurtles down the tracks toward an inevitable trainwreck.

Let’s just hope and pray that there will be some salvageable pieces left when it all jumps the tracks. Physicians who have wedded themselves to hospital-based and other large ACO-aligned medical groups for security will find themselves among the wreckage.

The only hope for physicians in the long run is to move outside the current system of third-party payers and decentralizing toward a cash-based practice. The inevitable outcome of the coming disaster in health care (and no, our politicians won’t prevent it) is severe rationing of care, long waits for doctors visits, diagnostic studies, and surgery. For patients, catastrophic coverage (if you can get it) with HSAs will ultimately prove the safest and most reliable way to get access to health care.

An entirely new industry has cropped up in recent years as trial lawyers set their sights on making money off physicians, corporations and other targets–particularly financing malpractice suits through hedge funds. In 2010, hedge funds invested $1 billion in these types of suits, much of it for medical malpractice cases…

… the rewards can be remarkable for investors, which is why dollars are flowing into these hedge funds. Payouts can result in tens of millions of dollars.

George Soros, call your office…

Having milked all the money they can from sub-prime mortgages, derivatives, credit default swaps, and political largess from wholly-owned and operated politicians, and after causing a depression or two, our financial wizards now turn their attention to where the real money is: suing doctors. Gotta love it. Ya think, maybe, just maybe, our tort system is a little out of control?

In days gone past — when there was hope about changing such things — I would have launched into a diatribe about the need for reigning in the lawyers, tort reform, etc. etc. Perhaps age, experience, and a touch of wisdom have led me to see the futility of such righteous indignation. Simply put: the system is never going to change. Sadly, we are locked in: the consequences of our current tort system is carved in stone, and they will be both inevitable — and ugly.

The system will never change because the system is the problem: most politicians are lawyers, and lawyers pour ungodly amount of money into the politicians’ pockets — the Democratic Party is a wholly-owned subsidiary of the Trial Lawyers Association (90 percent of its $30.7 million in contributions since 1989 went to Democrats). The AMA — purportedly representing physicians — is now a political, socialist animal, having embraced the dark side themselves, making hundreds of millions selling the diagnosis and procedure codes to physicians required to be (under)paid by the Feds and big insurance.

Tort reform? Fuggeddaboutit. When it has been passed at the state level, it has been gutted by the courts (need I mention that judges are lawyers, too?). And tort reform will do nothing to change the enormous cost increases brought about by defensive medicine — at best it may moderate malpractice insurance premiums, when it survives the courts, which it rarely does.

Frivolous lawsuits are helping drive physicians out of the profession and pushing up the cost of health care. A Gallup-Jackson health care survey released last year found that $1 in every $4 spent in health care is for unnecessary tests and procedures that doctors order to prevent from being sued.

As 32 million new patients acquire health insurance under ObamaCare and the number of Medicare recipients doubles over the next decade, the physician shortage will be worse than ever. Hedge funds that target doctors will not only make health care more expensive, but they will make a doctor very hard to find.

The parasite has grown fat and happy sucking blood from its host — but at some point the host weakens and dies. Best pick his pocket now, while the gettin’ is good. His days are numbered.

Stay healthy, folks — the doctor will likely not be around when you need him. Maybe you can call your lawyer instead — or your friendly hedge fund manager.

Word of my demise, widespread and nefarious as it has been, is most assuredly premature. I must put these scurrilous rumors to rest…

But life has been, well, most interesting…

The past year or so has been one of the most challenging in many a season, on a number of fronts. Professionally, the passage of Obamacare has made it abundantly clear that the independent private practitioner is a dying breed, and likely will disappear — with the exception of cash-only, concierge-style arrangements — within the next few years. The administrative burden is crushing — unfunded mandates, such as pay-for-performance, complianceprograms, HIPAA, mandated “government certified” EMRs (even though existing, non-certified ones are fully functional), and intrusive, abusive audits by the Feds and third party carriers. Such mandates and regulatory excesses place, or will soon place, such an overwhelming burden on the solo physician or small group as to make their continued existence unsustainable, even in the near term — and the full implementation of Obamacare will put roses on their grave. Reimbursements are dropping precipitously (my income dropped about 25% last year), as expenses spiral upward (employee health insurance rates are up 25%; malpractice rates up 15%, etc., etc.). The small business model of solo practice or small medical group is rapidly becoming extinct: its executioner, Big Government and Big Insurance.

The medical-legal environment remains as hostile and capricious as ever — I have endured two lawsuits in the past three years, both resolved with decidedly mixed outcomes while taking an enormous toll both in time wasted and emotional sobriety. I hope to share some insights thus gleaned on this horrendously dysfunctional system in the not-too-distant future.

Personally, although my health remains good, the exhaustion borne of these and other struggles had taken much of the joy and energy from life. The time for renewal was long overdue.

And so, big changes are in store: my practice will be sold in the next few months to a large medical group affiliated with a nearby hospital, and I will have as a primary responsibility inpatient hospital care, with a much diminished office practice focusing primarily on my specialty of male infertility and vasectomy reversal. I have decidedly mixed feelings about this change — I anticipated going to my deathbed as a private, solo practitioner, loving the independence and rich patient relationships which this brings.

But I am weary. After nearly 30 years in private practice, I am not sure which straw broke the camel’s back, but it is most surely broken. It is a weariness born of 14 hour days; of dictating charts and finishing paperwork until 8 or 9 pm each night, after starting the day at 7 am; of endless audits by the insurance industry and Medicare; of the constant threat of litigation; of the crushing burden of one more federal requirement mandated but never recompensed; of a host of ever-expanding administrative burdens having nothing to do with patient care, and everything to do with bureaucratic micromanagement of the profession. And this before we have even begun to see the nightmare which Obamacare will inflict. Camels weren’t designed to carry such a load.

But the change is nevertheless much anticipated in a host of other ways, with its reduced administrative and regulatory burdens, and substantial increase in free time. For me, the war is over: I have fought the good fight, and no longer see it as profitable to battle the inexorable forces which threaten to crush a beloved profession. My spirit is in many ways free now, as though a great burden has been lifted. God is good, and has been gracious and kind to me in so many ways.

I have needed an extended break from blogging to process these many life changes, but in its absence have heard the siren call of the muse quietly whispering to my soul.

So I am back — bitterly clinging to God, guns and guitars — and hope to speak of each in their turn, among others, as the spirit moves. For those who have checked back regularly, only find a petrifying post from the past, you have my great gratitude for your loyalty. I hope to reward that loyalty with something of worth in the coming days.

It has been clear since the passage of Obamacare, with its ludicrous economic projections and Enron-accurate accounting, that the outcome of this gargantuan medical gewgaw will be enormous shortfalls in funding for healthcare. The long-term consequences of its financial chicanery are legion, from spiraling deficits, to drastic cutbacks in funding to hospitals and health care providers , to the hyperbolically-described “death panels”: restrictions in payment for health care services as determined by faceless bureaucrats, based on cost considerations masquerading under the paper-thin guise of “medical consensus.”

One of the most disastrous aspects of this plan, both economically and practically, has been the decision to provide coverage for the low-income uninsured by rolling them into Medicaid, the joint federal and state health insurance program for the poor. Medicaid in virtually every state has been an economic disaster, leading to massive state budgetary deficits, and reimbursements to physicians and other health providers substantially below the costs of providing services. This has resulted in the inevitable migration of physicians out of Medicaid, and increasingly from Medicare as well, as Medicare treads the same path of massive bureaucratic burdens on providers and sharply declining reimbursements. The end result has been a crisis of access, where covered patients under these federal programs are increasingly unable to find physicians who will see them. The massive expansion of beneficiaries in Medicaid will drastically worsen this access problem, leaving many, if not most, of the newly covered without health care.

In a classic statist response to this inevitable and impending crisis, our aristocratic masters have discovered, anew, the joys of coercion and intimidation in solving another of their self-engendered debacles:

Today the Antitrust Division, joined by Idaho Attorney General … forced a a group of Boise orthopedists to accept price controls for worker’s compensation and HMO contracts as part of a settlement accusing the doctors of “price fixing.” According to the complaint, the conspiring orthopedists engaged in two antitrust conspiracies, which took place from 2006 to 2008. In the first conspiracy, through a series of meetings and other communications, the orthopedists agreed not to treat most patients covered by workers’ compensation insurance.

They entered into a group boycott in order to force the Idaho Industrial Commission to increase the rates at which orthopedists were paid for treating injured workers. The Idaho Industrial Commission sets the fee schedule that determines the amount that orthopedists and other healthcare providers receive for treating patients covered by workers’ compensation insurance. The boycott resulted in a shortage of orthopedists willing to treat workers’ compensation patients…

In the second conspiracy, all of the defendants … and other conspiring orthopedists agreed to threaten to terminate their contracts with Blue Cross of Idaho. They jointly threatened to terminate their contracts to force Blue Cross of Idaho to offer better contract terms to orthopedists.

The proposed settlement prevents the Idaho Orthopedic Society and the named orthopedists from agreeing with their competitors on fees and contract terms. The settlement also prohibits them from collectively denying medical care to patients, refusing to deal with any payer or threatening to terminate contracts with any payer.

To say this action is chilling is a profound understatement: the implications of this settlement are nothing less than the erosion and ultimate destruction of our current system of providing health care in this country.

At first glance, this appears to be a legitimate attack on a price-fixing scheme by physicians to increase their income. The reality is far more sinister.

The Justice Department, in cooperation with the Idaho State Attorney General, brought suit against the physicians under the Sherman Antitrust Act. Passed in 1890, it was designed to prevent collusion by Standard Oil and other oil companies to raise prices by creating monopolies or cartels. The Act and its application has been controversial since day one, and it has morphed over the years to address real or perceived commercial malfeasance far removed from its original intent.

The case against the physicians in Idaho represents a tectonic shift in the way government deals with the physicians they pay. As the Mises Economics blog points out:

This case is a watershed for two reasons: First, until now the Federal Trade Commission, not the Justice Department, has taken the lead in prosecuting physicians. Since 2000, the FTC has brought about three dozen cases against physicians (all but one of which settled without any trial). But the FTC only has civil and administrative jurisdiction; the Antitrust Division has civil and criminal jurisdiction. The Sherman Act makes no distinction between civil and criminal “price fixing,” so in a case like this, it’s entirely a matter of prosecutorial discretion whether to charge the doctors with a civil or criminal offense. Based on the descriptions in the Antitrust Division’s press release, there’s certainly no reason they couldn’t have prosecuted the doctors criminally and insisted upon prison sentences — and there’s little doubt such threats were made or implied to obtain the physicians’ agreement to the proposed “settlement.”

The second reason this is a landmark case is that the Justice Department has unambiguously stated that refusal to accept government price controls is a form of illegal “price fixing.” The FTC has hinted at this when it’s said physicians must accept Medicare-based reimbursement schedules from insurance companies. But the DOJ has gone the final step and said, “Government prices are market prices,” in the form of the Idaho Industrial Commission’s fee schedule. The IIC administers the state’s worker compensation system … This isn’t a quasi-private or semi-private entity. It’s a purely government operation.

What’s more, the Antitrust Division has linked a refusal to accept government price controls with a refusal to accept a “private” insurance company’s contract offer. This leaves little doubt that antitrust regulators consider insurance party contracts the equivalent of government price controls — and physicians and patients have no choice but to accept them.

Please read the whole article, in particular the update at the end. This settlement is nothing short of stunning.

Has the nickel dropped yet?

Virtually all health care provided in this country is contractual, whether by the Federal Government or third party private insurers. The consolidation of the insurance industry and the growth of government-funded health care — which Obamacare vastly expands — means that, with the exception of certain cash-based niches such as cosmetic surgery and Lasik procedures, physicians are legally obligated to accept the contractual fee for any covered service. The cartel in health care lies not with the physicians — who remain loosely organized if at all and prohibited (rightly and ethically so, in many ways) from unionization — but with the government and the insurance industry. The insurance industry closely tracks federal actions, both in regulation and fees — and hence both private insurance and the Federal Government collude in very real ways to fix physician fees.

In most areas of the country, a small number of major national insurance carriers insure the vast majority of patients not covered under Federal programs — thus leaving physicians largely powerless to refuse the increasingly austere payments these plans offer, lest they find themselves without patients. Thus the government and private insurance carriers are free to ratchet fees downward to the point where there can no no longer be economic viability for physicians. This is exactly the scenario under which the Idaho orthopedists declined to see patients — very reluctantly — who were covered under workman’s compensation, and threatened to withdraw en mass from their Blue Cross of Idaho contracts. They quite simply had no other leverage against the government/insurance cartel.

Now they have none.

It is important to realize that under antitrust law, there does not need to be a formal agreement or conspiracy to “fix prices” — collusion can be inferred by the behavior of competitors, to wit: if enough physicians in an area decline to see, say, Medicaid patients, because of unsustainably low fees, the Justice Department may infer that they are colluding to fix prices, and move against them with an antitrust action.

Checkmate.

It should not be difficult to see the inevitable outcome of this coercive economic thuggery. Physicians will inevitably be forced into large organizational relationships — primarily hospital-based (toward which there is a virtual stampede from private practice over the past 2 years) for economic security. But this financial haven will prove short-lived, as the endless financial pressures of burgeoning health care costs and spiraling federal and state deficits will drive many physicians from practice altogether as burdensome regulation and plummeting incomes ultimately drive the best and the brightest to find employment elsewhere. There will then be no doctor to see you — coerced or not — and the answer, as always the case in such government-engendered crises — must be a government solution: government-employed physicians. Hello, National Health Service.

Hyperventilatory, catastrophizing rhetoric? Right-wing extremist fear-mongering? Hysterical overreaction to loss of income? No, none of the above. Mark my words, we are witnessing the disassembly of the American system of medicine — a system which, for its many flaws, has provided the best and most advanced health care the world has ever known. For some, its destruction will be a victory, flush with the naive Utopian vision of universal, government-controlled health care.

In my prior post I highlighted some of the problems with Medicaid, the joint state and federal health coverage for the poor. In case you might think that physicians won’t participate simply because the reimbursement is so poor (which would certainly be reason enough), check this out, from my state medical society today:

The WSMA has complained to both the Centers for Medicare and Medicaid Services (CMS) Region X and the Washington Department of Social and Health Services (DSHS) about the egregiously burdensome requests made of physicians’ practices by the Audit Medicaid Integrity Contractor (MICs). CMS has awarded the Medicaid audit contract for Washington to Health Management Services (HMS) of Irvine, Texas.

HMS is making unrealistic requests of practices in preparation of “field audits:” An eight page detailed request for information on each of the practice’s “providers,” with a 15 calendar day deadline; complete medical records on claims selected for audit, in some cases hundreds of records, and for records dating back to January 2004. Even worse, the lengthy list of records requested does not include patients’ names, only identification numbers and dates of birth!

So, let’s see: Medicaid pays far less than the cost of providing care, and often take 6 months to pay that poor pittance. For those dwindling number of physicians foolish enough to remain in this system, they pursue aggressive audits which require enormous amount of practice resources in response, and then, after such an audit, almost certainly will require large “refunds” of money “fraudulently” paid to physicians, who have failed to master the Byzantine and inscrutable regulations which no mere mortal can understand, much less comply with.

Is it any wonder that physicians are are heading for the lifeboats of this sinking vessel?

So, let’s move the uninsured in large numbers into this very same system, shall we?

From the New England Journal of Medicine, a recent physician survey on the effects of the pending health care reform legislation on physician supply:

Key Findings
Physician Support of Health Reform in General
â€¢ 62.7% of physicians feel that health reform is needed but should be implemented in a more targeted, gradual way, as opposed to the sweeping overhaul that is in legislation.
â€¢ 28.7% of physicians are in favor of a public option.
â€¢ 3.6% of physicians prefer the â€œstatus quoâ€ and feel that the U.S. health care system is best â€œas is.

Health Reform and Primary Care Physicians
â€¢ 46.3% of primary care physicians (family medicine and internal medicine) feel that the passing of health reform will either force them out of medicine or make them want to leave medicine.

Health Reform, Public Option, and Practice Revenue/Physician Income
â€¢ 41% of physicians feel that income and practice revenue will â€œdecline or worsen dramaticallyâ€ with a public option.
â€¢ 30% feel income will â€œdecline or worsen somewhatâ€ with a public option.
â€¢ 9% feel income will â€œimprove somewhatâ€ with a public option, and 0.8% feel income will â€œimprove dramaticallyâ€ with a public option.

Health Reform, Public Option, and Physician Supply
â€¢ 72% of physicians feel that a public option would have a negative impact on physician supply, with 45% feeling it will â€œdecline or worsen dramaticallyâ€ and 27% predicting it will â€œdecline or worsen somewhat.
â€¢ 24% of physicians think they will try to retire early if a public option is implemented.
â€¢ 21% of physicians would try to leave medicine if a public option is implemented, even if not near retirement age at the time.

Health Reform and Recommending Medicine to Others as a Career
â€¢ 36% of physicians would not recommend medicine as a career, regardless of health reform.
â€¢ 27% would recommend medicine as a career but not if health reform passes.
â€¢ 25% of physicians would recommend medicine as a career regardless of health reform.
â€¢ 12% would not recommend medicine as a career now but feel that they would recommend it as a career if health reform passes

With states squeezing payments to providers even as the economy fuels explosive growth in enrollment, patients are finding it increasingly difficult to locate doctors and dentists who will accept their coverage. Inevitably, many defer care or wind up in hospital emergency rooms, which are required to take anyone in an urgent condition.

…

The inadequacy of Medicaid payments is severe enough that it has become a rare point of agreement in the health care debate between President Obama and Congressional Republicans. In a letter to Congress after their February health care meeting, Mr. Obama wrote that rates might need to rise [hedge alert!] if Democrats achieved their goal of extending Medicaid eligibility to 15 million uninsured Americans.

In 2008, Medicaid reimbursements averaged only 72 percent of the rates paid by Medicare, which are themselves typically well below those of commercial insurers, according to the Urban Institute, a research group. At 63 percent, Michigan had the sixth-lowest rate in the country, even before the recent cuts.

In Flint, Dr. Nita M. Kulkarni, an obstetrician, receives $29.42 from Medicaid for a visit that would bill $69.63 from Blue Cross Blue Shield of Michigan. She receives $842.16 from Medicaid for a Caesarean delivery, compared with $1,393.31 from Blue Cross.

What the Times neglects to mention is that physicians’ overhead expenses substantially exceed these reimbursements — every Medicaid patient seen will cost the physician more than they will be reimbursed, often substantially more. Malpractice premiums annually for obstetricians? Generally well over $100,000. It takes a lot of $29 office visits to pay for that — and that’s just one part of overhead.

So, for those who believe we have to do “something” to fix health care, so let’s just pass this monstrosity and fix it later, this is what you’re looking at: fewer doctors, already in significant shortage; health “insurance” that pays so poorly no physician will be financially able to see you.

My suggestions, if this health care bill passes? 1) stay healthy, very healthy; 2) start saving a lot of money, since your only access to health care will likely be a shadow system where physicians will see you for cash only.

Welcome to the new millennium in health care.

What’s the alternative? Well, I hope to lay some out in the near future, time permitting.

As the Democrats in Congress press forward in blind determination to pass their health care reform legislation come hell or high water, the pernicious effects of the legislation are increasingly becoming evident to anyone who takes the time to dig into its details. Though our Congressional representatives cannot seem to find the time to read these gargantuan, 2000-page bills, busy as they are padding their pockets with filthy lucre from lobbyists and interest groups, those at the state level who are will be responsible for picking up the credit card bills from this monomaniacal spending spree are starting to sweat. Even the Blue states — no strangers to fantasy spending budgets, punitive taxes, and political giveaways — can see the handwriting on the wall.

Washington has a 13.2% uninsured rate and one half of these people are in the age range of 18-34. Because of the bill \'s individual mandate that would require every adult to buy health insurance, 432,000 young healthy people in the state would be forced to make this purchase … The bill also requires a community rating price control on all policies which would cause these young Washingtonians to pay a higher price for coverage, while older, sicker individuals would pay less for their insurance.

On the other end of the age spectrum, 890,000 seniors have Medicare coverage in Washington. Congress plans to finance the Senate bill in part by cutting Medicare by $471 billion. Physician reimbursement would be reduced by 21%, while Medicare Advantage would essentially be eliminated, forcing 205,000 Washington seniors out of the program and back into traditional Medicare. Access to doctors is already a problem for Washington seniors because of low Medicare payments compared to private insurance. Further cuts in how much Medicare pays doctors will only make this access problem worse for seniors.

In fairness here, the 21% cut in physician reimbursements is by no means certain: Congress has consistently blocked these “budget neutrality” cuts in the past (to prevent a mass exodus of physicians willing to see Medicare patients), even though they use the imaginary $250 billion “savings” as part of the budgetary chicanery to make Obamacare look affordable.

But Medicare Advantage plans are squarely in the sights of the Congressional cost-cutting guns. These plans provide benefits to Medicare patients using private health insurance, typically providing much better benefits than Medicare alone while costing less than expensive supplemental plans which merely cover Medicare’s substantial co-pays and deductibles. MAs are very popular — 30-40% of Medicare-eligible patients use Advantage plans, and the percentage has been growing rapidly. The drastic slash in funding for MA plans will result in benefit cuts and stiff premium hikes, driving many patients back to traditional Medicare, drastically ratcheting up out-of-pocket expenses for the elderly and cutting many of their benefits.

And it should be stressed that physician access problems in Medicare patients (it is extremely difficult in Washington to find primary care physicians who accept new Medicare patients, and the specialists are fast bringing up the rear given Medicare’s drastic cuts in fees to specialists) are not simply about low payments, and greedy doctors wanting more money; it is about reimbursing physicians to provide care at levels substantially lower than their overhead costs.

Quite simply, when you see a Medicare patient, you lose money.

Of course, you don’t have to be young or on Medicare to reap the benefits of health care reform:

Almost 130,000 Washington residents have health savings accounts (HSAs) and high deductible insurance plans. The Senate bill reduces the HSA contribution amount by one half and doubles the penalty for non-medical withdrawals. New government limitations will probably eliminate high deductible policies and consequently eliminate HSAs. All HSA holders would lose their personal coverage and be forced to buy traditional insurance.

The Seattle area has growing industries in biotech and medical device manufacturing. The Senate bill would add a 10% to 20% tax on these businesses. The cost would either be passed on to consumers or, more likely, would cause a reduction in medical research and development.

Almost 2.7 million workers and their family members in Washington receive health insurance through their employersâ€™ self-insured programs. These people would be allowed to keep their insurance for five years. The plans must then comply with strict government benefit plans which would cause many employers to drop their coverage and force many workers to join a government plan. In addition, generous employer-sponsored insurance will be subject to a new 40% tax. In three years, 20% of all workers will be paying this tax and in six years, 20% of all households making more than $50,000 a year will have to pay this tax.

And then there’s Medicaid — coverage for the poor co-funded by federal and state governments. Obamacare extends health insurance to the uninsured poor by greatly expanding Medicaid, which is already well on its way to bankrupting the states:

Under the Senate-passed bill the number of Medicaid recipients in Washington would immediately increase by over 280,000 people. The federal taxpayers would initially pay for these new enrollees, but within five years state taxpayers would be forced to pay at least $6.8 billion more over the following ten years. The total cost of Medicaid to Washington taxpayers would then be nearly $36 billion for that ten year period. Access to doctors for Medicaid patients is even worse than for Medicare patients because of lower doctor reimbursement rates. Adding hundreds of thousands of people to Medicaid, when these patients are already being turned away by doctors, makes no sense for either patients or taxpayers.

This is fiscal insanity, akin to buying a ticket for passage on the Titanic after it has hit the iceberg.

Washington State is hardly alone in its terror about the coming health care regime. California, whose credit rating is shakier than a welfare queen on crack, is looking at financial and medical Armageddon as well. From the New York Times:

The [California Medicaid] program, known as Medi-Cal, currently serves roughly 6.5 million poor Californians. And that number could increase by 2 million under the pending legislation. Congress wants to use the Medicaid program as a way to cover more of the uninsured poor, reasoning that it’s a relatively cheap way to go by relying on existing programs.

But doctors say only a third of the state’s 60,000 practicing physicians are participating in the program because of low reimbursement rates, and they fear that more physicians will opt out.

“Increasing eligibility for Medi-Cal without increasing reimbursement rates would be catastrophic,” said Brennan Cassidy, president of the 35,000-member California Medical Association. “There’s no place for those patients to go for primary care because doctors aren’t accepting them.”

Again, the problem is not merely “low reimbursements” — it is Medicaid payment rates which cover less than half a physician’s costs to see the patient.

It is difficult to overstate how disastrous the pending Congressional legislation will be for health care and our nation’s financial stability. Are we really getting ready to jump off this precipice?

The blogs have been abuzz about the big news from Arizona: The Mayo Clinic in Arizona will no longer be accepting Medicare patients for primary care.

The Mayo Clinic, praised by President Barack Obama as a national model for efficient health care, will stop accepting Medicare patients as of tomorrow at one of its primary-care clinics in Arizona, saying the U.S. government pays too little.

More than 3,000 patients eligible for Medicare, the government \'s largest health-insurance program, will be forced to pay cash if they want to continue seeing their doctors at a Mayo family clinic in Glendale, northwest of Phoenix, said Michael Yardley, a Mayo spokesman. The decision, which Yardley called a two-year pilot project, won \'t affect other Mayo facilities in Arizona, Florida and Minnesota.

Obama in June cited the nonprofit Rochester, Minnesota-based Mayo Clinic and the Cleveland Clinic in Ohio for offering â€œthe highest quality care at costs well below the national norm.â€ Mayo \'s move to drop Medicare patients may be copied by family doctors, some of whom have stopped accepting new patients from the program, said Lori Heim, president of the American Academy of Family Physicians…

I’m surprised it took this long.

Mayo Clinic has long had a well-earned reputation for providing high-quality care at lower cost than much of the health care economy, due in large part to their successful formula (closed panel, salaried clinic physicians, and the resulting tight peer review) which is difficult or impossible to reproduce throughout the highly-diversified delivery systems in U.S. healthcare.

But Mayo Clinic is now coming to terms with the hard economic realities of seeing Medicare patients: it costs more to see them than you are paid:

The Mayo organization had 3,700 staff physicians and scientists and treated 526,000 patients in 2008. It lost $840 million last year on Medicare, the government \'s health program for the disabled and those 65 and older…

For years, physicians and clinics have simply absorbed this cost, effectively using their cash flow from better-paying private insurers to cover their Medicare losses. And we have reached the point where this calculus is no longer viable — a line crossed some years ago with Medicaid, the federal health program for the poor, whose reimbursements are only 60% or less of what Medicare currently pays.

What we have here is an unsustainable business model.

Typically, the folks at CMS downplay this reality, using the accounting chicanery so prevalent among our government bureaucrats, who love to piss on your leg and tell you it’s raining:

Nationwide, doctors made about 20 percent less for treating Medicare patients than they did caring for privately insured patients in 2007, a payment gap that has remained stable during the last decade, according to a March report by the Medicare Payment Advisory Commission, a panel that advises Congress on Medicare issues. Congress last week postponed for two months a 21.5 percent cut in Medicare reimbursements for doctors.

Yes, the gap may have remained stable — but Medicare payment rates have declined significantly over the past decade. In 1997 the Medicare conversion factor per relative value unit (RVU) was $40.97; in 2007, it was $37.89 — a nearly 10 percent decline, without factoring in inflation — and not including significant reductions in relative value units themselves (which are purportedly a hard measure of the costs and value of the service provided, but in reality are frequently “recalculated” to reduce Medicare expenditures), and a marked increase in bundling (wrapping several services together and paying for only one). What has happened is that private insurers have followed Medicare’s lead and also significantly reduced their fees, which are commonly calculated based on Medicare’s rules and formulas, but at a slightly higher conversion factor.

So while the ratio may appear stable, the reality is that both Medicare and private carriers have been dropping their fees, while medical expenses (salaries, benefits, supplies, malpractice premiums, etc.) have risen significantly faster than inflation. So the income vs. expense curves are now crossing for many, if not most, medical practices, and Medicare patients are beginning to generate significant losses, while private reimbursements can no long cover the difference. The only economically sane decision to remain solvent is to cut back or eliminate Medicare patients. The result? Reduced access to care. Of course the politicians will take credit for reducing health care costs — caring for fewer patients will certainly cost less.

Who needs death panels?

This is simple economics, really — but far too difficult for our politicians and liberal policy wonks to understand:

Robert Berenson, a fellow at the Urban Institute \'s Health Policy Center in Washington, D.C., said physiciansâ€™ claims of inadequate reimbursement are overstated. Rather, the program faces a lack of medical providers because not enough new doctors are becoming family doctors, internists and pediatricians who oversee patientsâ€™ primary care.

â€œSome primary care doctors don \'t have to see Medicare patients because there is an unlimited demand for their services,â€ Berenson said. When patients with private insurance can be treated at 50 percent to 100 percent higher fees, â€œthen Medicare does indeed look like a poor payer,â€ he said.

No, Medicare doesn’t just look like a poor payer — it is a poor payer, and doesn’t cover the expenses involved in providing the medical care it pays for — even for a highly efficient organization like Mayo Clinic. This idiot’s theory is that simply by increasing the number of primary care providers, competition will be greater, and more MDs will be willing to take less to provide care. Law of supply and demand and all that.

So if you’re selling TVs which cost you $500 to purchase wholesale at a retail price of $350 (and that’s the price the government mandates), opening new dealerships will make this arrangement more economically viable, through competition.

Where do they find these morons?

Not unexpectedly, Mayo Clinic’s jilted Medicare patients are none to happy, as they are being asked to pay cash (gasp!) to keep their physicians:

A Medicare patient who chooses to stay at Mayo \'s Glendale clinic will pay about $1,500 a year for an annual physical and three other doctor visits, according to an October letter from the facility. Each patient also will be assessed a $250 annual administrative fee, according to the letter. Medicare patients at the Glendale clinic won \'t be allowed to switch to a primary care doctor at another Mayo facility.

A few hundred of the clinic \'s Medicare patients have decided to pay cash to continue seeing their primary care doctors, Yardley said. Mayo is helping other patients find new physicians who will accept Medicare.

â€œWe \'ve had many patients call us and express their unhappiness,â€ he said. â€œIt \'s not been a pleasant experience.â€

Mayo \'s decision may herald similar moves by other Phoenix-area doctors who cite inadequate Medicare fees as a reason to curtail treatment of the elderly, said John Rivers, chief executive of the Phoenix-based Arizona Hospital and Healthcare Association.

â€œWe \'ve got doctors who are saying we are not going to deal with Medicare patients in the hospitalâ€ because they consider the fees too low, Rivers said. â€œOr they are saying we are not going to take new ones in our practice.â€

So Mayo’s trying to offload their Medicare patients onto other primary care physicians in the community, who no doubt will be more than happy to pick up these new financial albatrosses.

Best of luck with that plan.

The solution to this imminent disaster in access is not merely an increase in Medicare payment rates — Medicare and Medicaid are hell-bound for bankruptcy, and a few band-aids won’t stem the hemorrhage, but only make it worse. The imminent passage of “health care reform” legislation now bubbling in the witches’ cauldron of Congress will not only worsen Medicare’s situation — half a billion dollars are being cut from Medicare under the new legislation — but will instead bring this access disaster to private insurers as well. As their loss ratios are fixed by law at unsustainable levels, and community ratings forces them to accept high-cost patients without financial compensation for their increase risk and cost exposure, they will be forced to raise premiums to untenable levels — or drastically cut reimbursements to hospitals and physicians.

The system is a disastrous maze, and needs to be completely dismantled, and rebuilt from scratch. And the chances of that happening are zilch, zip, zero.